News

21

Oct 2015

With rising court fees, could ADR be an alternative to court?

New proposals from the Ministry of Justice could see further increases in court fees, with the maximum charges climbing to £20,000 or more for claims over £200,000. Opposition to these measures has been predictably fierce on the grounds of access to justice, which is purportedly a public service, becoming unattainable.

Arguments have also been put forward that these reforms could result in lost revenue for law firms, particularly in the City, due to fees in financial centres, such as New York, being more competitively priced. Further concerns have been expressed over the impact of these changes on small businesses and individuals, who would not have access to the funds required to pursue their debts through the courts and consequently could be pushed into insolvency. A worrying scenario. Could mediation, or “ADR” be a viable alternative for those who cannot afford to pursue debts through the courts?

Alternative Dispute Resolution (“ADR”) has various merits that are often suited to the needs of small business owners and individuals. Firstly and most importantly, the fees can be considerably cheaper. The table below indicates the fees for mediation via the Ministry of Justice’s online directory.

Amount you are claiming

Fees per party

Length of session

£5000 or less

£50 + VAT£100+ VAT

1 hour 2 hours

£5000 to £15,000

£300 + VAT

3 hours

£15,000 - £50,000**

£425+ VAT

4 hours

For sums greater than £50,000, the fees are individually negotiated, however, given the rates above, fees are unlikely to come close to the kind of figures which have been proposed for the second round of increases in court fees.

Current court fees for money claims can be found at https://www.gov.uk/make-court-claim-for-money/court-fees. For small claims, the courts appear to be considerably cheaper, particularly if you use the ‘Money Claim Online’ service, which is applicable for fixed sums under £100,000 that are against no more than 2 people or organisations. Above £100,000 however, the current court fee already rises to at least 5% of the claim, and will be even more if further increases are approved. It is perfectly feasible that a business looking to recover a debt of £200,000, might not have a spare £20,000 available to instigate proceedings.

Mediation has the additional benefit of being strictly confidential, so only the parties involved and the mediator are privy to the discussions and the outcome, whereas court proceedings are public and could result in reputations and business relationships being damaged. Furthermore, a resolution can usually be arrived at more quickly using mediation than taking the matter to court. Many mediation firms claim that 90% of their cases are resolved, most of these on the day of the mediation. For those cases which are not resolved, the judiciary looks favourably upon parties who have already pursued mediation before reverting to the courts.

The significant drawback is that it is not possible to force the party that you are in dispute with to agree to the mediation process; for this you have to rely on the courts. However, the type of person who is unwilling to enter negotiations at all, is unlikely to settle the dispute outside of the courts anyway.

Let us hope that these increases will not take effect, but if they do it might be time to consider mediation as an alternative.